Evaluation of 5 C'S of credit in approving loans application

Abstract

The objective of this study is to conduct a thorough examination of the Five C's of credit character, capacity, capital, collateral, and conditions in the context of Davao City. Through this assessment, the study aims to provide insights into the creditworthiness of individuals and businesses in the region, aiding financial institutions in making informed lending decisions. Loan officers in Davao City as respondents, aiming to gather valuable insights into their perspectives on the application of the Five C's of Credit in evaluating borrowers and shaping lending decisions within the local financial landscape. In this manner, the study employed a descriptive quantitative research design. Frequencies/frequency counts, percentage, and mean were used to examine the data. The results found that most were female loan officers over twenty-five years old in banks of Davao City. In addition, capital and collateral received the highest mean scores among the various factors considered. This indicates that the financial strength and stability of borrowers, as reflected in their capital resources, and the presence of valuable collateral are particularly crucial determinants influencing creditworthiness in the local context. The higher mean scores for these two elements suggest a heightened emphasis placed by loan officers on assessing the borrower's financial reserves and the tangible assets offered as security, underscoring the significance of these factors in the credit evaluation process. Furthermore, researchers recommend that financial institutions prioritize targeted interventions, such as enhanced borrower profiling, capacity analysis and thorough evaluation of economic conditions, to strengthen these aspects and ensure a more comprehensive understanding of creditworthiness.